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The living wage movement – steady stream to tidal wave

When I signed up to the Google Alerts (other search engines are available) for living wages 18 months ago, I didn’t quite expect the volume of news stories from all over the world on campaigns, comments, new living wage employers, debates about raising minimum wages and analytical articles arguing the economic and social pros and cons of increasing wages.

For Living Wage Week, I did a quick and dirty review of the last few months of alerts (this pdf version contains graphs). If you were visiting from Mars, looking at the distribution of pro-living wage campaigns and statements, you might believe that the countries most in need of a wage boost are the USA and the UK rather than anywhere in Asia or Africa. Some of these campaigns took a creative, direct-action approach like the bogus living wage “book” on Amazon and the living wage special offer labels on Tesco’s shelves. There was even a living wage football chant aimed at Arsenal football club.

But, being from Earth, you will know that what they’re really telling us is not where the greatest need is, but where the strongest voices are. While millions in Africa and Asia have no jobs at all, millions more are working in extremely low paid jobs or as bonded or forced labourers. Of these, many are women doing long hours of unpaid domestic work, sometimes on top of low-paid jobs. But without education, trade unions or other forms of collective negotiation, a free press and a communication channel to their government, their need for wages they can live decently on will never be voiced.

Yet, as a closer look at stories from the UK and the USA show, voice alone may not be enough. While in the USA there were 127 pro-living wage campaigns or statement stories, compared to just 68 in the UK - the proportions were almost reversed when it came to employers actually starting to pay living wages; in this period 38 articles announced new UK living wage employers (13 private sector and 25 public or third sector – mostly universities and councils), with just five in the US (of which one was private sector). There are now over 1,000 accredited living wage employers in the UK, including, as of this month, ETI.

On the other hand, there were 14 stories of regional minimum wage increases in the US (vs one national minimum wage rise in the UK).

While the issue is being loudly and publicly debated in the global North, in countries like Turkey, Taiwan and even China – countries that produce most of the goods that we buy - the debate is just beginning.

On October 22, Just-style reported that “Action plans are being developed in several African countries to push for living wages, with unions across the region agreeing to work towards this goal. Representatives from Mauritius, Madagascar, Lesotho, Ethiopia, South Africa and Nigeria met in Johannesburg last week to discuss the issue as part of the IndustriAll Global Union’s Sub-Saharan Africa Regional Conference.”

On September 21, The Guardian reported that, following pay disputes and strikes in Cambodia, eight major European garment retailers – all ETI members – wrote to the Cambodian government not only urging them to increase minimum wages, but offering to increase the prices they pay to make this possible. On October 2, Voice of America reported that US companies then echoed this call.

Other themes that emerged include women being disproportionately represented among those not receiving a living wage (surprise, surprise) and living wages being a high priority issue for young people (who some say are at greatest risk of unemployment if minimum wages are raised). Some stories argued that lower taxes rather than higher wages are the answer, others encourage building up the skills of workers and the quality of jobs. Yet others described how increased wages make workers more friendly and loyal, and incentivise employers to invest more in their training.

But basic economics teaches that increasing the price of a commodity (which, sadly is how some employers see their workforce) reduces demand for it, so are living wages a good idea, or do they cause unemployment? As The Forecaster explains, demand for labour is relatively ‘inelastic’; “the number of minimum-wage workers needed to efficiently run a small business is driven by the particular needs of that enterprise. If the wage is reduced by a dollar or two, most such businesses will not hire more workers than they need. Correspondingly, if the wage is increased by a dollar or two, there is little or no incentive to compromise the efficient operation of the business by laying off minimum-wage workers.” The reality seems to bear out this theory. There were significantly more stories showing that living wages are good for business, good for the economy, good for workers and their families and communities and do not cause unemployment than statements to the contrary.

Successful multi-national enterprises such as Nestlé and Ikea have recently seen – and acted on – the business benefits of paying better wages. As have three large US retailers and a Spanish supermarket featured in Zeynep Ton’s book ‘The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits’ reviewed by Forbes. H&M is also making a concerted effort to create the conditions for better pay across its supply chain using the Fair Wage approach.

Despite all this progress, huge gaps remain between rich and poor. Nick Hanauer, one of the USA’s super-rich, who ascribes his phenomenal entrepreneurial success to his “intuition about what will happen in the future” predicts that “If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us.” In a letter to his fellow zillionaires, he says the only way to avoid them is to pay workers more – but assures us that this can only be good for business because more people will have more disposable income to spend on their products and there’ll be a smaller welfare burden on the state. Henry Ford had the same philosophy, as does the Chinese government which is rapidly increasing the legal minimum wage to create a more prosperous population for a healthier economy.

So, the steady stream of pressure to do the right thing and pay living wages is building to a virtual tidal wave. ETI has now spelled out exactly what we expect of our members in relation to our Base Code clause on living wages and has laid out seven steps they can take to help create conditions that make continuous growth of wages possible and sustainable. Conditions like freedom of association and collective bargaining by informed and empowered workers, effective management, pay and HR systems and inclusive wage setting mechanisms. By following these steps and by working in collaboration with each other, with governments, NGOs and workers, companies will be well equipped to harness the energy of the tidal wave to greater prosperity for everyone, rather than being crushed by it. And their workers, rather than being paid poverty wages, or being made redundant, will be able to live in dignity…and, like Danish fast food workers, may even be able to afford to buy the things they produce.

I’ll leave the final word on the subject to a figure of abiding authority and good sense. Mary Poppins.

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ETI's blog covers issues at the intersection of business, news and ethical trade. We welcome a range of insights and opinions from our guest bloggers, though don't necessarily agree with everything they say.